French President Nicolas Sarkozy and German Chancellor
Angela Merkel said in a joint statement on Wednesday they were
determined to keep Greece in the euro zone.

Greek debt insurance costs reflect a high probability of
restructuring or default of the country's debt, and further
damage to peripheral euro zone economies is likely to hit
trading partners in central and eastern Europe in particular.

"The focus remains on Europe. The narrative is so
eurocentric at the moment as Europe is the epicentre of global
risk aversion," said Paul Hollingworth, head of research at BB
Securities.

"Investors are watching how peripheral bond markets are
performing, which is a distraction from specific issues and
challenges in emerging markets."

Emerging sovereign debt spreads tightened 5 basis
points to 359 bps over U.S. Treasuries, after stretching in the
previous session to their widest levels in two years.

Emerging market debt has until recently been an
outperforming asset class.

South African state-owned Transnet said this week it may
delay a planned global bond until next year.

However, Serbia is holding an investor roadshow for a
possible debut dollar issue totalling $700 million, according to
IFR, a Thomson Reuters news and markets information service.

The forint fell 0.4 percent to a fresh one-year
low against the euro on continued concern about government plans
to allow Swiss franc loanholders to repay their loans at a
favourable rate, a blow for Hungarian banks.

"Households' increasing utility costs...will intensify in
the winter, and together with a weak labour market and a
still-strong Swiss franc, we see the non-performing loan ratio
at around 12-13 percent in the next 6-12 months," said ING
analysts in a client note.

The zloty hovered close to the previous session's
26-month low against the euro, though the Romanian leu
edged up from the year's low against the euro hit on Wednesday.

The rouble fell across the board, hitting an
eight-month low against the dollar, on foreign exchange
purchases on expectations the central bank will widen the
euro-dollar basket's trading band next month.

Russia's central bank defied expectations of no policy
change on Wednesday by opting to narrow the spread between its
lending and deposit rates, seeking to strengthen its influence
over market interest rates.

Ukraine's five-year credit default swaps were quoted at 628
bps, according to Markit, their widest in 14 months, on concerns
about a delay in IMF payments.

"Recent budgetary developments in Ukraine have led to a
decreasing probability of IMF approval for upcoming and delayed
disbursements and this has been seen in the widening risk
premium for Ukraine in recent days," said BNP Paribas analysts
in a client note.
(Additional reporting by Sujata Rao and Sebastian Tong; editing
by Anna Willard)